TRADE FINANCE SOLUTIONS, INC
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007
Table of Contents
Report of Registered Public Accounting Firm........................ F - 2
Consolidated Balance Sheets........................................ F - 3
Consolidated Statements of Operations.............................. F - 4
Consolidated Statements of Changes in Shareholders' Deficit........ F - 5
Consolidated Statements of Cash Flows ............................. F - 6
Notes to Consolidated Financial Statements......................... F - 7-16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Trade Finance Solutions, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Trade Finance
Solutions, Inc. and Subsidiaries as of December 31, 2008 and 2007 and the
related consolidated statements of operations, changes in shareholders' deficit,
and cash flows for the years ended December 31, 2008 and 2007. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trade Finance Solutions, Inc.
and Subsidiaries as of December 31, 2008 and 2007 and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
JEWETT, SCHWARTZ, WOLFE & ASSOCIATES
Hollywood, Florida
September 25, 2009
F-2
TRADE FINANCE SOLUTIONS, INC
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2008 2007
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 285,210 $ 229,978
Financial assets held for trading - 83,220
Accounts receivable, net 1,518,082 417,645
Loans receivable 1,665,168 2,307,293
Related party receivables - 1,518,534
Prepaid expenses 46,340 5,822
------------- -------------
Total Current Assets 3,514,800 4,562,492
Fixed assets, net 11,901 14,407
Incorporation costs, net 19,791 28,432
Deferred tax asset 21,008 54,608
------------- -------------
Total Assets $ 3,567,500 $ 4,659,939
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 152,700 $ 192,431
Due to related party 116,445 71,885
Demand loans payable 3,366,414 4,562,481
------------- -------------
Total Current Liabilities 3,635,559 4,826,797
------------- -------------
Total Liabilities 3,635,559 4,826,797
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock ($.01 par value; Unlimited shares;
100 shares issued and outstanding) 1 1
Cumulative translation adjustment 13,337 (7,809)
Accumulated deficit (81,397) (159,050)
------------- -------------
Total Stockholders' Deficit (68,059) (166,858)
------------- -------------
Total Liabilities and Stockholders' Deficit $ 3,567,500 $ 4,659,939
============= =============
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
F-3
TRADE FINANCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended
December 31,
-----------------------------
2008 2007
------------ -----------
NET REVENUES $ 7,852,801 $ 3,428,953
COST OF REVENUES 7,015,216 3,025,389
------------ ------------
GROSS PROFIT 837,585 403,564
------------ ------------
OPERATING EXPENSES:
General and administrative 973,551 496,090
Depreciation and amortization 6,312 6,095
Loss on disposal of asset 4,409 -
------------ ------------
Total operating expenses 984,272 502,185
------------ ------------
Total operating income (146,687) (98,621)
------------ ------------
OTHER INCOME/(EXPENSE)
Foreign currency gain/(loss) 250,770 (42,963)
------------ ------------
Total other income/(expense) 250,770 (42,963)
------------ ------------
Income (loss) before provision for income taxes 104,083 (141,584)
------------ ------------
Provision (benefit) for income taxes 26,430 (49,355)
NET INCOME (LOSS) $ 77,653 $ (92,229)
============ ============
EARNINGS PER SHARE - Basic $ 777 $ (922)
============ ============
Weighted average shares outstanding - Basic 100 100
============ ============
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
F-4
TRADE FINANCE SOLUTIONS, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
Common Stock Additional Cumulative
-------------------
paid-in Translations Accumulated
Shares Amount capital Adjustment Deficit Total
----------------------------------------------------------------------------------------
Balance at December 31, 2006 100 $ 1 $ - $ - $ (66,821) $ (66,820)
Cummulative Translation Adjustment (7,809) (7,809)
Net loss for the year ended
December 31, 2007 (92,229) $ (92,229)
-------------------------------------------------------------------------------------
Balance at December 31, 2007 100 $ 1 $ - $ (7,809) $(159,050) $ (166,858)
Cumulative Translation Adjustment 21,146 21,146
Net income for the year ended
December 31, 2008 77,653 77,653
-------------------------------------------------------------------------------------
Balance at December 31, 2008 100 $ 1 $ - $ 13,337 $ (81,397) $ (68,059)
=====================================================================================
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
F-5
TRADE FINANCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
-------------------------------------------------
December 31, December 30,
2008 2007
----------------------- ------------------------
Cash flows from continuing operating activities:
Net (loss) $ 77,653 $ (92,229)
Adjustments to reconcile to net cash inflow from operating activities:
Depreciation and amortization 11,147 (543)
Deferred income tax expense 33,600 (54,608)
Cumulative translation adjustment 21,146 (7,810)
Increase in accounts receivable (1,100,437) (417,645)
Loans receivable 642,125 (2,307,293)
(Increase)/decrease in deposits and prepaid items (40,518) (11)
Increase (decrease) in accounts payable and accrued liabilities (39,731) 114,153
----------------------- ------------------------
Net cash provided by (used in) operating activities (395,015) (2,765,986)
----------------------- ------------------------
Cash flows from continuing investing activites:
Purchase of fixed assets - (11,615)
Financial assets held for sale 83,220 (83,220)
----------------------- ------------------------
Cash provided by (used in) investing activities 83,220 (94,835)
----------------------- ------------------------
Cash flows from continuing financing activites:
Proceeds from demand loans payable (1,196,067) 2,419,134
Proceeds from related party loan 44,560 71,885
Repayment of Related party receivable 1,518,534 82,746
----------------------- ------------------------
Cash provided by (used in) financing activities 367,027 2,573,765
----------------------- ------------------------
Increase (decrease) in cash during the period 55,232 (287,056)
Cash at the beginning of the period 229,978 517,034
----------------------- ------------------------
Cash at the end of the period $ 285,210 $ 229,978
======================= ========================
Supplemental information:
Cash paid for interest $ - $ -
======================= ========================
Cash paid for taxes $ - $ -
======================= ========================
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
F-6
TRADE FINANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 AND 2007
1. DESCRIPTION OF BUSINESS
Trade Financial Systems, Inc. (the "Company") was incorporated in Canada, in the
Province of Ontario in March of 2006. Since its inception, TFS has had its
headquarters in Markham, Ontario, a suburb of Toronto. The Company was
established to provide financing solutions, including Purchase Order Financing,
Fulfillment Services and Factoring or Invoice Discounting for credit worthy
customers of eligible goods and services. Founded by professionals with
backgrounds in both the distribution and financial sectors, TFS initially funded
transactions predominantly with re-sellers and distributors.
TFS has a wholly owned U. S. subsidiary, TFP International Inc. (TFP), which is
incorporated in the State of Florida and is located in Miami, Florida. This
subsidiary specializes in international trade and is responsible for all
activities from its Miami office.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary TFP International, Inc. All intercompany
transactions and accounts have been eliminated in consolidation.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.
On an on-going basis, the Company evaluates its estimates, including those
related to valuation of options and warrants, bad debts, inventories, intangible
assets, contingencies and litigation. United Energy bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
F-7
FIXED ASSETS
Fixed assets are recorded at cost less accumulated depreciation. Depreciation is
provided on the declining balance basis, when the asset is placed into service,
at the following rates:
Computer hardware 45%
Furniture, fixtures and equipment 20%
Vehicle 30%
Leasehold improvements 5 years straight-line
Half rates are used in the year of acquisition.
Incorporation costs
Incorporation costs are recorded at cost less accumulated amortization.
Amortization is provided on the straight-line basis over 10 years.
REVENUE RECOGNITION
Revenue includes product sales. The Company recognizes revenue from product
sales in accordance with Staff Accounting Bulletin (SAB) No. 104, "Revenue
Recognition in Financial Statement" which is at the time customers are invoiced
at shipping point, provided title and risk of loss has passed to the customer,
evidence of an arrangement exists, fees are contractually fixed or determinable,
collection is reasonably assured through historical collection results and
regular credit evaluations, and there are no uncertainties regarding customer
acceptance
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments with
original maturities of three months or less.
CONCENTRATIONS
Cash and cash equivalents are maintained in financial institutions. Deposits
held with banks may exceed the amount of insurance provided on such deposits.
Generally, these deposits may be redeemed upon demand and therefore bear minimal
risk.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate their fair values due to the short-term
maturity of these instruments.
F-8
Related party transactions
Related party transactions occur in the normal course of operations and are
recorded at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
INCOME TAXES
The Company accounts for income taxes according to SFAS 109 "Accounting for
Income Taxes" which requires an asset and liability approach to financial
accounting for income taxes. Deferred income tax assets and liabilities are
computed annually for the difference between the financial statement and tax
bases of assets and liabilities that will result in taxable or deductible
amounts in the future, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period, plus or minus the change during the period
in deferred tax assets and liabilities.
The Corporation adopted the provisions of FIN 48, "Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement 109," effective January 1,
2007. FIN 48 prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Benefits from tax positions should be
recognized in the financial statements only when it is more likely than not that
the tax position will be sustained upon examination by the appropriate taxing
authority that would have full knowledge of all relevant information. A tax
position that meets the more-likely-than-not recognition threshold is measured
at the largest amount of benefit that is greater than fifty percent likely of
being realized upon ultimate settlement. Tax positions that previously failed to
meet the more-likely-than-not recognition threshold should be recognized in the
first subsequent financial reporting period in which that threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
recognition threshold should be derecognized in the first subsequent financial
reporting period in which that threshold is no longer met. FIN 48 also provides
guidance on the accounting for and disclosure of unrecognized tax benefits,
interest and penalties. Adoption of FIN 48 did not have a significant impact on
the Company's financial statements.
The Company files income tax returns in the U.S. federal jurisdiction and
various states. The Company has not been subject to U.S. federal income tax
examinations by tax authorities nor state authorities since its inception in
2000.
Foreign currencies
The Company follows the temporal method when translating foreign currency
transactions. Under this method:
i. Monetary items are translated at the rates of exchange prevailing at the
balance sheet date,
ii. Non-monetary items are translated at historic
exchange rates; and,
F-9
iii. Revenue and expenses (other than amortization) are translated at
average monthly rates of exchange during the year.
The resulting gains or losses are credited or charged to earnings excepts for
those relating to monetary items having a fixed life which are deferred and
amortized over the life of the particular item.
The Company uses the Canadian dollar as its functional currency. The Company's
wholly-owned subsidiary uses the US dollar as its functional currency. Assets
and liabilities of the Company are translated into US dollars at the period-end
exchange rates, and revenue and expenses are translated at the average exchange
rates during the period.
The resulting gains or losses are deferred and included as a separate component
of shareholder's equity.
PER SHARE DATA
SFAS No. 128 establishes standards for computing and presenting earnings per
share ("EPS"). The standard requires the presentation of basic EPS and diluted
EPS. Basic EPS is calculated by dividing income/loss available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income/loss
available to common shareholders by the weighted average number of common shares
outstanding adjusted to reflect potentially dilutive securities. At June 30,
2008 and 2007 the Company does not have any dilutive instruments.
ACCOUNTING FOR LONG-LIVED ASSETS
The Company's long-lived assets include property and equipment. In accordance
with SFAS No. 144, long-lived assets other than goodwill are reviewed on a
periodic basis for impairment whenever events or changes in circumstances
indicate that the carrying amounts of the assets may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future undiscounted net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements that the Company has adopted or that will be
required to adopt in the future are summarized below.
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles
In June 2009, the Financial Accounting Standards Board issued Statement "FASB"
issued Statement No. 168, "The FASB Accounting Standards Codification and the
F-10
Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 168"). SFAS
No. 168 will become the single source of authoritative nongovernmental U.S.
generally accepted accounting principles ("GAAP"), superseding existing FASB,
American Institute of Certified Public Accountants ("AICPA"), Emerging Issues
Task Force ("EITF"), and related accounting literature. SFAS No. 168 reorganizes
the thousands of GAAP pronouncements into roughly 90 accounting topics and
displays them using a consistent structure. Also included is relevant Securities
and Exchange Commission guidance organized using the same topical structure in
separate sections. SFAS No. 168 will be effective for financial statements
issued for reporting periods that end after September 15, 2009. This statement
will have an impact on the Company's financial statements since all future
references to authoritative accounting literature will be references in
accordance with SFAS No. 168.
Subsequent Events
In May 2009, the FASB issued Statement of SFAS No. 165, Subsequent Events. This
Statement establishes general standards of accounting for and disclosures of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date. This Statement is effective for interim and annual periods ending after
June 15, 2009 and as such, we will adopt this standard in the first quarter of
fiscal year 2010. We are currently assessing the impact of the adoption of SFAS
165, if any, on our financial position, results of operations or cash flows.
Interim Disclosure about Fair Value of Financial Instruments
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. This FSP amends FASB
Statement No. 107 to require disclosures about fair values of financial
instruments for interim reporting periods as well as in annual financial
statements. The FSP also amends APB Opinion No. 28 to require those disclosures
in summarized financial information at interim reporting periods. This FSP
becomes effective for interim reporting periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. The adoption
of this FSP is not expected to have a material impact on our consolidated
financial statements.
Determining the Fair Value of a Financial Asset When the Market for That Asset
is Not Active
In October 2008, the FASB issued FSP FAS No. 157-3, "Determining the Fair Value
of a Financial Asset When the Market for That Asset is Not Active." This FSP
clarifies the application of SFAS No. 157, "Fair Value Measurements," in a
market that is not active. The FSP also provides examples for determining the
fair value of a financial asset when the market for that financial asset is not
active. FSP FAS No. 157-3 was effective upon issuance, including prior periods
for which financial statements have not been issued. The impact of adoption was
not material to the Company's consolidated financial condition or results of
operations.
F-11
The Hierarchy of Generally Accepted Accounting Principles
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC's approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles". The implementation of this standard will not
have a material impact on the Company's consolidated financial position and
results of operations.
Determination of the Useful Life of Intangible Assets
In April 2008, the FASB issued FSP FAS No. 142-3, "Determination of the Useful
Life of Intangible Assets", which amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of intangible assets under SFAS No. 142 "Goodwill and Other Intangible Assets".
The intent of this FSP is to improve the consistency between the useful life of
a recognized intangible asset under SFAS No. 142 and the period of the expected
cash flows used to measure the fair value of the asset under SFAS No. 141
(revised 2007) "Business Combinations" and other U.S. generally accepted
accounting principles. The Company is currently evaluating the potential impact
of FSP FAS No. 142-3 on its consolidated financial statements.
Disclosure about Derivative Instruments and Hedging Activities
In March 2008, the FASB issued SFAS No. 161, "Disclosure about Derivative
Instruments and Hedging Activities, an amendment of SFAS No. 133." This
statement requires that objectives for using derivative instruments be disclosed
in terms of underlying risk and accounting designation. The Company is required
to adopt SFAS No. 161 on January 1, 2009. The Company is currently evaluating
the potential impact of SFAS No. 161 on the Company's consolidated financial
statements.
Business Combinations
In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations." This
Statement replaces the original SFAS No. 141. This Statement retains the
fundamental requirements in SFAS No. 141 that the acquisition method of
accounting (which SFAS No. 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. The objective of SFAS No. 141(R) is to improve the relevance, and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. To accomplish
that, SFAS No. 141(R) establishes principles and requirements for how the
acquirer:
a. Recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest
in the acquiree.
b. Recognizes and measures the goodwill acquired in the business combination
or a gain from a bargain purchase.
c. Determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination.
F-112
This Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008 and may not be applied before
that date. The Company is unable at this time to determine the effect that its
adoption of SFAS No. 141(R) will have on its consolidated results of operations
and financial condition.
Noncontrolling Interests in Consolidated Financial Statements--an amendment of
ARB No. 51
In December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51." This Statement
amends the original Accounting Review Board (ARB) No. 51 "Consolidated Financial
Statements" to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. This Statement is effective for fiscal
years and interim periods within those fiscal years, beginning on or after
December 15, 2008 and may not be applied before that date. The Company is unable
at this time to determine the effect that its adoption of SFAS No. 160 will have
on its consolidated results of operations and financial condition.
Fair Value Option for Financial Assets and Financial Liabilities
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of SFAS No.
115," which becomes effective for the Company on February 1, 2008, permits
companies to choose to measure many financial instruments and certain other
items at fair value and report unrealized gains and losses in earnings. Such
accounting is optional and is generally to be applied instrument by instrument.
The election of this fair-value option did not have a material effect on its
consolidated financial condition, results of operations, cash flows or
disclosures.
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS
No. 157 provides guidance for using fair value to measure assets and
liabilities. SFAS No. 157 addresses the requests from investors for expanded
disclosure about the extent to which companies' measure assets and liabilities
at fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS No. 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and was adopted by the Company in the first quarter of fiscal
year 2008. There was no material impact on the Company's consolidated results of
operations and financial condition due to the adoption of SFAS No. 157.
F-13
Accounting Changes and Error Corrections
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections," which replaces APB Opinion No. 20, "Accounting Changes," and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements - An
Amendment of APB Opinion No. 28". SFAS No. 154 provides guidance on the
accounting for and reporting of accounting changes and error corrections, and it
establishes retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error. SFAS No. 154 is effective for accounting changes
and corrections of errors made in fiscal years beginning after December 15,
2005. The Company adopted SFAS No. 154 in the first quarter of fiscal year 2007
and did not have a material impact on its consolidated results of operations and
financial condition.
4. FINANCIAL ASSETS HELD FOR TRADING
2008 2007
$ $
- --------------------------------------------------- ------------- --------------
Fair value of forward foreign exchange contract - 83,220
- --------------------------------------------------- ------------- --------------
The companies use forward foreign exchange contracts to hedge against foreign
currency exposures arising from forecasted foreign currency cash flows on loans
receivable and amounts due from related party denominated in US dollars.
Unrealized gains and losses on these contracts are recognized in income as they
occur to offset unrealized gains or losses arising from foreign currency
fluctuations on the hedged items.
As of December 31, 2008, the Company did not hold any open forward foreign
exchange contracts.
5. DUE FROM (TO) RELATED PARTY
2008 2007
$ $
- ----------------------------------------------- --------------- ----------------
BAM Technology, Inc.
Loan Receivable - 1,579,884
Interest receivable - 29,776
Trade accounts payable (82,020) (73,429)
- ----------------------------------------------- --------------- ----------------
(82,020) 1,536,231
- ----------------------------------------------- --------------- ----------------
Amounts owing from BAM Technology Inc. are denominated in USD. The Companies are
related based on a common shareholder. The terms of the loan to BAM Technology,
Inc. are set out in a loan agreement dated May 1, 2006. Principal amounts are
advanced from time to time based on contracts approved by the Company. There are
no specific terms of repayment. Interest on these advances is calculated at 2%
per month.
F-14
During the year, the Company and BAM Technology, Inc. entered into the following
transactions:
2008 2007
$ $
- ------------------------------------------------- ------------- --------------
Purchases (6,513,530) (2,587,865)
Interest charge 7,938 428,292
- ------------------------------------------------- ------------- --------------
- ------------------------------------------------- ------------- --------------
6. LOANS RECEIVABLE
2008 2007
$ $
- ------------------------------------------------- ------------- --------------
Canadian dollar loans receivable 699,512 1,752,114
US dollar loans receivable converted to Canadian 1,129,324 555,739
Allowance for doubtful accounts (163,668) -
- ------------------------------------------------- ------------- --------------
1,665,168 2,307,853
- ------------------------------------------------- ------------- --------------
Loans receivable bear no specific terms or repayment and vary in interest terms
ranging from 1.5% to 3%
monthly.
7. FIXED ASSETS
2008 2007
---------- --------------- ----------- ------------
Accumulated Net book Net book
Cost Depreciation Value Value
$ $ $ $
- ---------------------------------- ---------- --------------- ----------- --- ------------
Computer hardware 1,261 723 538 1,229
Furniture, fixtures and equipment 12,464 2,503 10,499 4,783
Vehicles - - - 5,926
Leasehold improvements 2,806 1,403 1,403 2,469
- ---------------------------------- ---------- --------------- ----------- --- ------------
16,531 4,629 12,440 14,407
- ---------------------------------- ---------- --------------- ----------- --- ------------
8. DEMAND LOANS PAYABLE
2008 2007
$ $
- ----------------------------------------------------- ------------ -------------
Loans denominated in Canadian dollars - converted
Payable to shareholders 777,424 1,089,122
Payable to members of management 222,826 152,748
Payable to others 1,778,192 2,495,862
Loans denominated in US dollars
Payable to members of management 557,972 824,749
Payable to others 30,000 -
- ----------------------------------------------------- ------------ -------------
3,366,414 4,562,481
- ----------------------------------------------------- ------------ -------------
F-15
The loans represent subscriptions for debentures. As at year end, the debentures
had yet to be issued. The loans are carrying similar terms to the debentures to
be issued. The debentures have a term of five years but are redeemable at the
option of the holder on their respective anniversary date provided the Company
receives ninety days notice of such redemption, as such; they have been
classified as current. Interest accrues monthly at the rate of 1% per month on
the amounts advanced and is payable quarterly.
The agent for the debenture holders is Equity Transfer Service, Inc.
9. SUBSEQUENT EVENTS
On September 3, 2009, ONE Holdings, Corp. ( "ONE") acquired from the
shareholders of Trade Finance Solutions ("collectively referred to as
"Shareholders") 3,990 shares representing 99.75% of the Shareholders' common
shares owned in Trade Finance Solutions Inc. ("TFS"). For the TFS shares, each
Shareholder is to receive shares of the Registrant's common stock and cash
payments as per the Share Purchase. The cash component of the purchase price
will be calculated on an earn-out basis based on TFS' monthly earnings before
interest and taxes (EBIT) beginning with the measuring period as defined in the
Share Purchase Agreement, not to exceed purchase price of $6,000,000.00. In
addition to the cash portion of the purchase price, the shareholders shall
receive 1 share of ONE common stock (adjusted for forward or reverse splits
following the closing) for every $1.00 in EBIT achieved during the measuring
period ("Stock Compensation") subject to a maximum Stock compensation of 6
million shares of Registrant's common stock. The Shareholders are subject to a
lockup and leak out period as further defined in the Share Purchase Agreement.
Upon the purchase of the TFS Common Shares from the Shareholders, One has become
the majority shareholder of TFS.
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